M/s ISG Novasoft Technologies Limited , Bangalore v. Deputy Commissioner of Income Tax Circle-3(1)(1), Bangalore

ITA 3284/BANG/2018 | 2014-2015
Pronouncement Date: 18-03-2021 | Result: Partly Allowed

Appeal Details

RSA Number 328421114 RSA 2018
Bench Bangalore
Appeal Number ITA 3284/BANG/2018
Duration Of Justice 2 year(s) 3 month(s) 11 day(s)
Appellant M/s ISG Novasoft Technologies Limited , Bangalore
Respondent Deputy Commissioner of Income Tax Circle-3(1)(1), Bangalore
Appeal Type Income Tax Appeal
Pronouncement Date 18-03-2021
Appeal Filed By Assessee
Tags outstanding amount to AE akin to loan ,LIBOR
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 18-03-2021
Date Of Final Hearing 17-03-2021
Next Hearing Date 17-03-2021
Last Hearing Date 13-02-2020
First Hearing Date 17-12-2020
Assessment Year 2014-2015
Appeal Filed On 07-12-2018
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI CHANDRA POOJARI ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K. JUDICIAL MEMBER IT ( TP) A NO. 3284/BANG/2018 ASSESSMENT YEAR: 2014 - 15 ISG NOVASOFT TECHNOLOGIES LTD. MARUTHI SAPPHIRE 2 ND FLOOR 128/9 HAL AIRPORT ROAD MURUGESHPALYA BANGALORE 560 018. PAN: AABCI 24488Q VS. THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 3(1)(1) BANGALORE. APPELLANT RESPONDENT APPELLANT BY : S HRI P.C. KHINCHA CA RESPONDENT BY : MS. NEERA MALHOTRA C IT(DR)(ITAT ) BENGALURU. DATE OF HEARING : 17 .0 3 .202 1 DATE OF PRONOUNCEMENT : 18 .0 3 .202 1 O R D E R PER CHANDRA POOJARI ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF DCIT CIRCLE 3(1)(2) BANGALORE PASSED U/S. 143(3) R.W.S. 144C R.W.S. 92CA OF THE INCOME-TAX ACT 1961 [THE ACT] DATED 9.2.2018. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS O F APPEAL:- 1. THE ORDERS PASSED BY LEARNED DEPUTY COMMISSIO NER OF INCOME TAX CIRCLE-3(1)1) BANGALORE (HEREINAFTER RE FERRED TO AS AO FOR BREVITY) LEARNED ASSISTANT COMMISSIONER OF INCOME TAX TRANSFER PRICING-1(3)(2) BANGALORE (HEREINAFTER RE FERRED TO AS 'TPO' FOR BREVITY) AND HONORABLE DISPUTE RESOLUTION PANEL-1 (HEREINAFTER REFERRED TO AS HONORABLE DRP) ('AO 'TP O' AND IT(TP)A NO.3284/BANG/2018 PAGE 2 OF 11 DRP COLLECTIVELY REFERRED AS - LOWER AUTHORITIES' FOR BREVITY) ARE BAD IN LAW AND LIABLE TO BE QUASHED; GROUNDS RELATING TO TP ADJUSTMENT WITH RESPECT TO INTEREST ON DELAYED TRADE RECEIVABLES 1. THE LOWER AUTHORITIES HAVE ERRED IN: (I) COMPUTING A TRANSFER PRICING ADJUSTMENT ON ACCOUNT OF NOTIONAL INTEREST ON OUTSTANDING RECEIVABLES AMOUNT ING TO RS. 5 73 74 225/-. (II) RE-CHARACTERIZING THE OUTSTANDING TRADE RECEIVABLES AS ON 31ST MARCH 2014 AS A LOAN TRANSACTION WITHOUT APPRECIATING THAT THE OUTSTANDING TRADE RECEIVABLE FROM THE AE IS NOT AN INTERNATIONAL TRANSACTION WITHIN THE M EANING OF TERM AS PER SECTION 92B OF THE ACT; (III) WITHOUT PREJUDICE ASSUMING THAT RECEIVABLE IS AN INTERNATIONAL TRANSACTION THE LOWER AUTHORITIES HA VE ERRED IN NOT APPRECIATING THAT RECEIVABLE IS NOT SEPARATE TRANSACTION FROM THE SALE OF SERVICES FROM WHICH IT IS ARISING. (IV) NOT APPRECIATING THAT THE OUTSTANDING TRADE RECEIVA BLES FROM ITS AE IS ARISING FROM THE PROVISION OF IT ENA BLED SERVICES TO AE AND IT SHOULD NOT AGAIN BE TESTED SE PARATELY WHILE COMPUTING ARM'S LENGTH PRICE; (V) NOT APPRECIATING THAT NO SEPARATE ADJUSTMENT OF NOT IONAL INTEREST ON RECEIVABLES IS WARRANTED WHEN AFTER WOR KING CAPITAL ADJUSTMENT THE APPELLANT' S OPERATING MARGI N ARE AT ARM' S LENGTH; (VI) INCORRECTLY COMPUTING THE INTEREST ON OUTSTANDING T RADE RECEIVABLES: (VII) COMPUTING INTEREST FROM THE DATE OF INVOICE AND NOT FOR THE EXCESS CREDIT PERIOD ONLY; (VIII) WITHOUT PREJUDICE THE LOWER AUTHORITIES HAVE ERRED IN ADOPTING SBI INTEREST RATES ON SHORT TERM DEPOSITS FOR FY IT(TP)A NO.3284/BANG/2018 PAGE 3 OF 11 2013-14 FOR COMPUTING NOTIONAL INTEREST ON THE OUTSTANDING TRADE RECEIVABLES; (IX) WITHOUT PREJUDICE THE LOWER AUTHORITIES HAVE ERRED IN NOT ADOPTING LIBOR AS THE BASIS FOR BENCHMARKING. (X) ASSUMING WITHOUT ADMITTING THAT THE ADJUSTMENT IS T O BE MADE THE LOWER INCOME TAX AUTHORITIES HAVE ERRED I N NOT ALLOWING THE BENEFIT OF THE +/-3% RANGE PRESCRIBED IN THE PROVISO TO SECTION 92C(2). GENERAL GROUNDS 3. THE LEARNED AO HAS ERRED IN LEVYING INTEREST UND ER SECTION 234B OF RS. 1 17 51 297/-. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE INTEREST UNDER SECTION 2 34B IS EXCESSIVE. THE APPELLANT DENIES ITS LIABILITY TO PAY INTEREST UNDER SECTION 234B. THE APPELLANT SUBMITS THAT EACH OF THE ABOVE GROUND S/ SUB- GROUNDS ARE INDEPENDENT AND WITHOUT PREJUDICE TO ON E ANOTHER. THE APPELLANT CRAVES LEAVE TO ADD ALTER VARY OMI T SUBSTITUTE OR AMEND THE ABOVE GROUNDS OF APPEAL AT ANY TIME BEFO RE OR AT THE TIME OF HEARING OF THE APPEAL SO AS TO ENABLE THE INCOME-TAX APPELLATE TRIBUNAL TO DECIDE THE APPEAL ACCORDING T O LAW. THE APPELLANT PRAYS ACCORDINGLY. 3. THE ASSESSEE ISG NOVASOFT TECHNOLOGIES LIMITED ('ISGN INDIA') A COMPANY INCORPORATED UNDER THE COMPANIES ACT 1956 IS ENGAGED IN THE BUSINESS OF PROVIDING IT SUPPORT AND IT ENABLED SER VICES [ITES] IN THE NATURE OF MORTGAGE PROCESSING SUPPORT AND TECHNICAL SUPPORT SERVICES [BROADLY CLASSIFIED AS 'ITES] TO ITS AE. 4. FOR AY 2014-15 THE ASSESSEE FILED A RETURN OF I NCOME ON 30TH MARCH 2016 DECLARING TAXABLE INCOME OF RS. 16 82 4 1 890/-. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE ENTERED INTO INTERNATIONAL TRANSACTION WITH ITS AE OF RENDERING ITES SERVICES AND RECEIPT OF IT(TP)A NO.3284/BANG/2018 PAGE 4 OF 11 REIMBURSEMENT. WITH RESPECT TO INTERNATIONAL TRANSA CTIONS ENTERED INTO WITH AE THE AO MADE A REFERENCE U/S 92CA OF THE ACT TO THE TPO AFTER GETTING THE NECESSARY APPROVAL FROM THE PCIT. THE TPO PASSE D AN ORDER ON 25.10.2017 MAKING AN ADJUSTMENT OF RS. 3 59 22 610/ - IN RESPECT OF ITES SEGMENT AND RS. 3 27 21 491/- IN RESPECT OF NOTIONA L INTEREST ON OUTSTANDING RECEIVABLES. 5. THEREAFTER THE AO PASSED THE DRAFT ASSESSMENT O RDER ON 26.12.2017 INCORPORATING THE TP ADJUSTMENT. THE AO FURTHER DISALLOWED RS. 5 28 888/- TOWARDS PROVISION FOR RENT. AGGRIEVED B Y THE DRAFT ASSESSMENT ORDER THE ASSESSEE FILED OBJECTIONS BEFORE THE DR P. 6. BEFORE THE DRP WITH REGARD TO ITES SEGMENT IT WAS SUBMITTED THAT THE TPO HAD SELECTED FOUR COMPARABLES VIZ. INFOSYS BPO LTD. MICROLAND LTD. B N R UDYOG LTD. (SEG) AND CROSSDOMAIN SOLUTI ONS PVT. LTD. AND ARRIVED AT THE AVERAGE MARGIN OF THE COMPARABLES AT 23.41%. THE TPO COMPUTED THE APPELLANT'S MARGIN AT 19.47% AND MADE AN ADJUSTMENT OF RS. 3 59 22 610/-. 7. THE DRP IN ITS ORDER DATED 05.09.2018 REJECTED B N R UDYOG LTD (SEG) AS A COMPARABLE TO THE ASSESSEE AND HELD OTHE R THREE COMPANIES ARE COMPARABLE. POST EXCLUSION OF BNR UDYOG SINCE THE ASSESSEES MARGIN WAS WITHIN ARM'S LENGTH RANGE THE TPO IN THE OGE O RDER TO DRP ORDER DATED 18.09.2018 DELETED THE ENTIRE TP ADJUSTMENT WITH RESPECT TO ITES SEGMENT. 8. ON THE ISSUE OF INTEREST ON TRADE RECEIVABLES T HE TPO TREATED THE OUTSTANDING RECEIVABLES FROM AE AS ADVANCEMENT OF L OAN AND COMPUTED THE ARM'S LENGTH INTEREST ADOPTING 6-MONTH LIBOR PL US 400 BASIS POINTS AT 4.3836%. TP ADJUSTMENT WAS COMPUTED AT RS. 3 27 21 491/- THE DRP DIRECTED THE TPO TO ADOPT PREVAILING SHORT-TERM DEP OSIT INTEREST RATE OF SBI IT(TP)A NO.3284/BANG/2018 PAGE 5 OF 11 AS ARM'S LENGTH INTEREST RATE. ACCORDINGLY THE TPO HAS ADOPTED THE SBI INTEREST RATE AND TP ADJUSTMENT HAS BEEN ENHANCED T O RS. 5 73 74 255/-. 9. AGGRIEVED BY THE ABOVE THE ASSESSEE IS IN APPE AL BEFORE US WITH RESPECT TO TP ADJUSTMENT ON NOTIONAL INTEREST ON RE CEIVABLES. IN THIS REGARD THE THE LD. AR SUBMITTED THAT THE ASSESSEE IS A DEB T FREE COMPANY. IT IS A WHOLLY OWNED SUBSIDIARY OF CFCL VENTURES LTD CAYMA N ISLANDS. THE ASSESSEE IS FULLY FUNDED BY THE PARENT COMPANY FOR ITS OPERATIONS IN INDIA. THE ASSESSEE HAS NO BORROWED FUNDS. THEREFORE THE ASSESSEE DOES NOT BEAR ANY WORKING CAPITAL RISK SINCE IT HAS BEEN FUL LY FUNDED BY ITS AE AND HAS NO WORKING CAPITAL CONTINGENCIES. 10. IT WAS FURTHER SUBMITTED THAT ASSESSEE IS A ZER O DEBT COMPANY AND IT DOES NOT HAVE ANY BORROWINGS EXCEPT FOR MEAGRE AMO UNT TOWARDS FINANCE LEASE OBLIGATIONS ON ASSETS ACQUIRED ON LEASE NO B ORROWED FUNDS ARE USED TO PASS ON ANY PRESUMED BENEFIT TO AE. THE ASSESSEE ALSO DOES NOT PAY ANY INTEREST TO ITS CREDITORS OR SUPPLIERS ON DELAY ED PAYMENTS. SINCE IT IS DEBT FREE COMPANY NO ADJUSTMENT CAN BE MADE TOWARD S NOTIONAL INTEREST ON RECEIVABLES. 11. IN SUPPORT OF ABOVE CONTENTION RELIANCE WAS PL ACED ON THE FOLLOWING DECISIONS: CASE LAW PAGE NO. OF PB II BECHTEL INDIA PVT. LTD. V. DCIT I.T.A .NO. 1478/DEL /2015 [TS- 638-ITAT-2015(DEL)-TP] (PAGES 365 TO 387 OF PB-II) FINDINGS AT PAGE 385 PARA 15.1 PCIT V. BECHTEL INDIA PVT. LTD. ITA 379/2016 [TS-50 8-HC- 2016(DEL)-TP] (PAGES 388 TO 389 OF PB-II) FINDINGS AT PAGE 389 PARA 4 INDUCTIS (INDIA) (P.) LTD. VS. ITO [2018] 99 TAXMANN.COM 167 (DELHI - TRIB.) FINDINGS AT PAGE 393 PARA 11 AND 12 IT(TP)A NO.3284/BANG/2018 PAGE 6 OF 11 12. THE LD. AR SUBMITTED THAT AS THE ASSESSEE IS A DEBT FREE COMPANY AND THEREFORE FOLLOWING THE RATIO OF ABOVE DECISION S TP ADJUSTMENT RELATING TO NOTIONAL INTEREST ON RECEIVABLE SHOULD BE DELETE D. 13. WITHOUT PREJUDICE TO ABOVE THE LD. AR SUBMITTE D THAT LIBOR HAS TO BE ADOPTED. IN THE ORDER U/S 92CA THE TPO HAS PR ESUMED THAT THE ASSESSEES AVERAGE MATURITY PERIOD OF RECEIVABLES I S BETWEEN 3 TO 5 YEARS AND ADDED 300 BASIS POINTS TO LIBOR BASED ON RBI MA STER CIRCULAR. THE TPO FURTHER ADDED 100 BASIS POINT FOR CURRENCY RISK . 14. IN THIS REGARD IT IS SUBMITTED THAT WEIGHTED A VERAGE MATURITY PERIOD OF ASSESSEES RECEIVABLES FROM AE'S IS 167 DAYS (PA GE 107 OF APPEAL PAPERS). AS PER THE RBI MASTER CIRCULAR NO. 8/2010- 11 DATED 1.7.2010 FOR AVERAGE MATURITY PERIOD UPTO 3 YEARS THE MAXIMUM C OST CEILING IS LIBOR PLUS 200 BASIS POINTS. THE RELEVANT EXTRACT FROM PA GE 24 OF THE RBI MASTER CIRCULAR IS GIVEN BELOW:- AVERAGE MATURITY PERIOD OF THE LOAN ON INVOCATION ALL-IN-COST CEILINGS OVER 6 MONTH LIBOR* UP TO 3 YEARS 200 BASIS POINTS THREE YEARS AND UP TO FIVE YEARS 300 BASIS POINTS MORE THAN FIVE YEARS 500 SIS POINTS * FOR THE RESPECTIVE CURRENCY OF BORROWING OR APP LICABLE BENCHMARK 15. IT WAS THEREFORE SUBMITTED THAT THE TPO'S APPRO ACH OF COMPUTING ALP FOR INTEREST IS NOT CORRECT. THE DRP REJECTED THE APPROACH OF THE TPO AND DIRECTED TO ADOPT SHORT-TERM DEPOSIT INTEREST R ATE OF SBI. THE ASSESSEE SUBMITS THAT THE RECEIVABLES FROM THE AES ARE DENOM INATED IN US DOLLARS. THEREFORE USD-LIBOR RATE SHOULD BE CONSIDERED TO BE NCHMARK THE RATE OF INTEREST IN COMPUTATION OF ARM'S LENGTH RATE. THE L D. DR SUBMITTED THAT THE IT(TP)A NO.3284/BANG/2018 PAGE 7 OF 11 DRP'S DIRECTION TO ADOPT SHORT-TERM DEPOSIT INTERES T RATE OF SBI SHOULD BE QUASHED. IN SUPPORT OF THE CONTENTION THAT LIBOR SH OULD BE ADOPTED AND DOMESTIC INTEREST RATE CANNOT BE ADOPTED HE RELIED ON THE FOLLOWING DECISIONS:- CIT VS. COTTON NATURALS (I) PVT. LTD ITA NO. 233/20 14 [TS-117- HC-2015(DEL)-TP1 INDEGENE LIFESYSTEMS (P.) LTD [2017185 TAXMANN.COM 60 (BANGALORE - TRIB.) DCIT V TECH MAHINDRA LIMITED ITA NO. 1176/MUM/2010 ; TATA AUTOCOMP SYSTEMS LTD [2012] 121 TAXMANN.COM 6 (MUM) 16. WITH RESPECT TO INTEREST RATE TO BE ADOPTED T HE APPELLANT RELIES ON THE FOLLOWING DECISIONS:- PARTICULARS CASE LAW PAGE NO. OF PB II ONLY LIBOR TO BE ADOPTED WITHOUT MARK UP CIT VS. COTTON NATURALS (I) PVT. LTD ITA NO. 233/2014 [TS-117-HC-2015(DEL)-TP] 423 429 SIVA INDUSTRIES & HOLDINGS LTD. VS. ACIT [2012] 26 TAXMANN.COM 96 (CHENNAI) 433 434 LIBOR + 100BPS KPIT CUMMINS INFOSYSTEMS LIMITED. V. ITO ITA NO. 1510/PN/2011 [TS-109-ITAT-2016(PUN)- TP] PAGE 445 PARA 11 LIBOR + ITO V GENPACT INFR ASTRUCTURE (HYDERABAD) PVT. LTD ITA NO. 2063/DEL/2015 PAGE 462-463 PARA 11 LIBOR + 200BPS CIT V. AURIONPRO SOLUTIONS LTD. [TS- 474 2017(BOM)-TP] PAGE 456 PARA 8 17. THE LD. AR SUBMITTED THAT VARYING RATES HAVE B EEN ADOPTED IN VARIOUS JUDICIAL DECISIONS. IT WAS SUBMITTED THAT T HE RATE FAVOURABLE TO THE ASSESSEE SHOULD BE ADOPTED. THE PREVAILING LIBOR RA TE WITHOUT ANY ADDITIONAL BASIS POINTS SHOULD BE CONSIDERED FOR BE NCHMARKING THE RATE OF IT(TP)A NO.3284/BANG/2018 PAGE 8 OF 11 INTEREST ON THE OUTSTANDING RECEIVABLES ESPECIALLY IN THE LIGHT OF THE FACT THAT THE ASSESSEE IS A DEBT FREE COMPANY NOT SUBJECTED TO ANY WORKING CAPITAL RISK. 18. AS REGARDS REASONABLE CREDIT PERIOD THE TPO H AS CALCULATED INTEREST FROM THE DATE OF INVOICE. THE LD. AR SUBMI TTED THAT IN THE COMMERCIAL WORLD EVERY PERSON WOULD GIVE REASONABL E TIME TO THE DEBTOR FOR PAYMENT. THEREFORE INTEREST CANNOT BE CHARGED FROM THE DATE OF INVOICE. THE ASSESSEE HAS OUTSTANDING RECEIVABLE ON LY FROM ITS AE FOR THE YEAR UNDER CONSIDERATION. THEREFORE THERE ARE NO I NTERNAL COMPARABLE AND THAT REASONABLE PERIOD FOR RECEIVABLE SHOULD BE CON SIDERED BASED ON THE DECIDED JUDICIAL PRECEDENTS AND FEMA REGULATIONS. T HE DETAILS ARE TABULATED BELOW: PARTICULARS CASE LAW PAGE NO. OF PB II 9 MONTHS CREDIT PERIOD AS PER FEMA NOTIFICATION NUMBER FEMA 23 (R)/2015- RB DATED 12-01-2016 [GSR 19(E) DATED 12-01-2016 PAGE 517 PARA 9(1) 6 MONTHS / 180 DAYS CREDIT PERIOD GSS INFOTECH LTD. V. DCIT [2018] 89 TAXMANN.COM 153 (HYDERABAD - TRIB.) PAGE 479 PARA 45 TO 48 C3I SUPPORT SERVICES VS. DCIT I.T.A. NO. 503/HYD/2017 PAGE 493 19. THE LD. AR SUBMITTED THAT A VIEW FAVOURABLE TO THE ASSESSEE SHOULD BE ADOPTED AND CREDIT PERIOD OF 9 MONTHS SHOULD BE CONSIDERED AS REASONABLE CREDIT PERIOD. ACCORDINGLY INTEREST SHOU LD BE CHARGED ONLY FOR RECEIVABLE BEYOND 9 MONTHS. IT(TP)A NO.3284/BANG/2018 PAGE 9 OF 11 20. IT WAS FURTHER SUBMITTED THAT INTEREST SHOULD B E COMPUTED ONLY FOR THE RELEVANT YEAR. IN CASE OF OPENING OUTSTANDING RECE IVABLES FROM AE THE TPO HAS COMPUTED THE INTEREST FROM THE DATE OF INVO ICE TILL THE DATE OF RECEIPT OF AMOUNT. THE TPO HAS THEREFORE COMPUTED I NTEREST FOR MONTHS FALLING BEFORE THE BEGINNING OF THE CURRENT PREVIOU S YEAR. 21. SIMILARLY FOR INVOICES RAISED DURING THE YEAR THE TPO HAS COMPUTED THE INTEREST FROM THE DATE OF INVOICE TILL THE DATE OF RECEIPT OF AMOUNT. THE TPO HAS THEREFORE COMPUTED INTEREST FOR MONTHS FALL ING BEYOND THE END OF THE CURRENT PREVIOUS YEAR. 22. IN THIS REGARD THE LD. AR SUBMITTED THAT ONLY INCOME OF CURRENT YEAR CAN BE ASSESSED BY THE AO/TPO. THE METHODOLOGY ADOP TED BY THE TPO TO COMPUTE THE INTEREST FOR MONTHS BEFORE THE BEGINNIN G OF THE CURRENT PREVIOUS YEAR AND FOR MONTHS BEYOND THE CURRENT PRE VIOUS YEAR IS NOT SUSTAINABLE IN LAW. THE IMPUGNED ASSESSMENT IS FOR FY 2013-14. THEREFORE INTEREST IF AT ALL SHOULD ONLY BE COMP UTED FOR THE PERIOD APRIL 1 2013 TO MARCH 31 2014. IT WAS PRAYED ACCORDINGLY. 23. ON THE OTHER HAND THE LD. DR SUBMITTED THAT TH E ISSUE IS SQUARELY COVERED BY THE DECISION OF THE SPECIAL BENCH IN THE CASE OF INSTRUMENTATION CORPORATION LTD. IN ITA NOS. 1548 & 1549/KOL/2009 D ATED 15.7.2016 WHEREIN IT WAS HELD THAT OUTSTANDING SUM OF INVOICE S IS AKIN TO LOAN ADVANCED BY ASSESSEE TO FOREIGN AE HENCE IT IS AN INTERNATIONAL TRANSACTION AS PER EXPLANATION TO SECTION 92B OF TH E ACT. FURTHER IT WAS SUBMITTED THAT ONCE IT IS AN INTERNATIONAL TRANSACT ION TP ADJUSTMENT IS TO BE MADE ON APPLYING LIBOR RATE AS APPLICABLE TO THE CO UNTRY WHERE THE AE IS SITUATED AND FOR THE EXCESS PERIOD OF CREDIT ALLOWE D TO AE FOR REALISATION OF INVOICES. FOR THIS PURPOSE SHE RELIED ON THE FOL LOWING CASE LAWS:- 1. SWISS RE GLOBAL BUSINESS SOLUTIONS INDIA PVT. LTD. VS DCIT IT(TP)A NO.3181/BANG./2018 DATED 21/05/2020 (BANG.TRIB.) (P G. 24-29 PARA 23) IT(TP)A NO.3284/BANG/2018 PAGE 10 OF 11 2. ARROW ELECTRONICS INDIA PVT. LTD. VS DCIT IT(TP)A NO.140/B/2014 DTD. 23.10.2019 (BANG.TRIB.) (PAGE 16-19 PARA 14 - 17) 3. THE DCIT VS M/S CGI INFORMATION SYSTEMS MANAGEMENT CONSULTATION PVT. LTD. IT(TP)A NO.505/B/16 IT(TP)A NO.626/B/16 & CO NO.146/B/18 DTD. 30.01.2020 (BANG.TRIB.)(PAGE 27-32 PARA 3.5.1 - 3.5.8). 24. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE LD. AR FAIRLY CONCEDED THAT OUTSTANDING AMOUNT ON ACCOUNT OF SALES/SERVICES BILLED TO AE AKIN TO LOAN ADVANCED B Y ASSESSEE IS AN INTERNATIONAL TRANSACTION. AS HELD BY THE HONBLE DELHI HIGH COURT IN THE CASE OF AVENUE ASIA BUSINESS ADVISORS (P.) LTD. V. DCIT [20 17] 398 ITR 120 (DEL) THERE SHOULD BE TP ADJUSTMENT ON THIS COUNT AFTER MAKING PROPER TP STUDY BY THE TPO AFTER CONSIDERING THE PERIOD OF CREDIT ENJOYED BY THE COMPARABLES AND ALSO APPLICABLE LIBOR RATE IN THE P LACE OF AES FOR BENCHMARKING THE RATE OF INTEREST TO ARRIVE AT THE ALP. WITH THESE OBSERVATIONS WE REMIT THE ISSUE IN DISPUTE TO THE FILE OF AO/TPO TO BENCHMARK THE INTEREST RATE IN THE LIGHT OF THE DEC ISIONS CITED BY LD. DR. FURTHER WE MAKE IT CLEAR THAT THE TPO SHOULD COMPU TE THE INTEREST ONLY FOR THE RELEVANT ASSESSMENT YEAR AFTER GOING THROUGH TH E RELEVANT AGREEMENTS ENTERED BY THE ASSESSEE WITH AES WHILE COMPUTING TH E ALP. 25. IN THE RESULT THE ASSESSEES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 18 TH DAY OF MARCH 2021. SD/- SD/- ( GEORGE GEORGE K. ) ( CHANDRA POOJARI ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE DATED THE 18 TH MARCH 2021. / DESAI S MURTHY / IT(TP)A NO.3284/BANG/2018 PAGE 11 OF 11 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT BANGALORE. BY ORDER ASSISTANT REGISTRAR ITAT BANGALORE.